This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk11: Ladies and gentlemen, good day, everyone, and welcome to Bipshop Holdings Limited's second quarter 2021 earnings conference call. At this time, I would like to turn the call to Ms. Jessie Zheng, Bipshop's head of investor relations. Please proceed, ma'am.
spk10: Thank you, operator. Hello, everyone, and thank you for joining the Bipshop second quarter 2021 earnings conference call. With us today are Eric Shen, our co-founder, chairman, and CEO, and David Tsui, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties. that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our safe property statements, in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward-looking statements may be made. Please note that certain financial measures used on this call, such as non-GAAP operating income, non-GAAP net income, and non-GAAP net income per ADS, are not presented in accordance with U.S. GAAP. Please refer to our earnings release for details relating to the reconciliations of our non-GAAP measures to GAAP measures. With that, I would now like to turn the call over to Mr. Eric Shim.
spk07: Good morning and good evening, everyone. Welcome and thank you for joining our second quarter 2021 earnings conference call. In the second quarter, we kept up our solid business momentum with co-operating metrics continue to trend healthily. Our user base maintained its strong growth, driven a continual increase in total GMV. During the quarter, Our total number of active cost users grew by 32% year-over-year to $51.1 million, and our total GMV increased by 25% year-on-year to RMB $48.1 million. Our most valuable user group showed especially strong growth momentum with cumulative super VIP membership increased by nearly 50% year-on-year, contributing about the third of the total GMV in the second quarter of 2021. These encouraging developments were the result of our relentless efforts to calibrate our strategic focus and increase operational synergies. In the second quarter, we continued to robust execute on our merchandising strategy. Our buyer teams successfully collaborated with an increasing number of suppliers and brand partners. As a result, we have not only been able to attract an increasing amount of unique branded merchandise to be sold on our platform, but have been able to do so at VIP shoppers' favorite discount price. In addition to our traditional deeply discount inventory covering an extensive range of brands, we now also carry a considerable proportion of made-for-VIP shop products. These are products specially customized for VIP shop by our brand partners. We are committed to increase the breadth and depth of our merchandising portfolio to offer users a differentiated selection of high-quality merchandise while creating dynamic price advantage for our discount sales. In the second quarter, we successfully instituted refinement at an operational level. User experience is one of our clear priorities. To this end, we implemented several initiatives, including better matching of merchandising selection to target users and improving overall incentive for our most valued users. On top of this, we also leveraged effective marketing to attract more younger shoppers to our platform. Looking forward to the second half of 2021, we remain committed to execution on our merchandising strategy. We are dedicated to create value for our new and existing customers, while also increasing the value we add for our core brand partners. We believe this will solidify our leading position in China's discount retail market. At this point, let me hand over the call to our CFO, David Cui, who will go over our operational and financial results.
spk05: Thanks, Eric, and hello, everyone. We are pleased to report a strong set of results for the second quarter of 2021. During the quarter, we delivered solid top-line growth with total net revenue reaching 29.6 billion RMB, representing a year-over-year increase of 22.8%. We also witnessed the sustainable growth momentum in business development, which is evidenced by our number of active customers. And total orders are growing by 32% and 30% year-over-year, respectively. Non-GAAP net income attributable to VIP shops shareholders also increased by 11.3% year-over-year to 1.5 billion RMB. In the second quarter of 2021, we repurchased approximately $301 million of our ADS in accordance with the $500 million share repurchase program we adopted in March earlier this year, showing both our confidence in the robustness of our business model and our dedication to delivering long-term value to our shareholders. Before I get started with detailed quarterly financial highlights, I would like to clarify that all the financial numbers presented below are in RMB and all the percentage changes refer to year-over-year changes unless otherwise noted. Total net revenue for the second quarter of 2021 increased by 22.8% year-over-year to 29.6 billion RMB from 24.1 billion RMB in the same period last year, primarily driven by a large number of total active customers. Growing profit for second quarter of 2021 increased by 20.6% year over year to 6.0 billion RMB from 4.9 billion RMB in the same period last year. Gross margin for the second quarter of 2021 was 20.1 percent compared with 20.5 percent for the same period in 2020. Total operating expenses for the second quarter of 2021 were 4.8 billion RMB compared to 3.8 billion RMB in the second quarter of 2020. As a percentage of total net revenue, total operating expenses for the second quarter of 2021 were 16.4 percent compared with 15.8% in the second quarter of last year. Fulfillment expenses for the second quarter of 2021 were 2.1 billion RMB as compared with 1.7 billion RMB in the same period in 2020. As a percentage of a total net revenue, fulfillment expenses for the second quarter of 2021 decreased to 6.9% from 7.0% in the second quarter of 2020. Marketing expenses for the second quarter of 2021 were 1.4 billion RMB as compared with 1.0 billion RMB in the same period of 2020. As a percentage of a total net revenue, marketing expenses for the second quarter of 2021 were 4.8% compared to 4.3% in the second quarter of 2020. The increase was primarily due to higher investment in advertising activities relating to customer acquisition and retention. Technology and content expenses for the second quarter of 2021 were 369.9 million RMB compared to 305.4 million RMB in the same quarter in 2020. As a percentage of a total net revenue, technology and content expenses for the second quarter of 2021 decreased to 1.2% from 1.3% in the second quarter of 2020. General and administrative expenses for the second quarter of 2021 were 1.0 billion RMB compared to 804.6 million RMB in the second quarter of last year. As a percentage of a total net revenue, general and administrative expenses for the second quarter of 2021 were 3.4% as compared with 3.3% in the same period of 2020. Income from operations before the second quarter of 2021 increased by 18.6% year-over-year to 1.5 billion RMB from 1.2 billion RMB in the second quarter of 2020. Operating margin for the second quarter of 2021 was 5.0% as compared with the 5.1% in the same period last year. Non-GAAP income from operations for the second quarter of 2021, which excluded the share-based compensation expenses and amortization of intangible assets resulting from business acquisition increased by 16.1% year-over-year to 1.7 billion RMB from 1.5 billion RMB in the second quarter of 2020. Non-GAAP operating margin for the second quarter of 2021 was 5.9% as compared with 6.2% in the second quarter of 2020. Non-income attributable to VIP staff shareholders for the second quarter of 2021 was 1.1 billion RMB compared to 1.5 billion RMB in the same year last year. Net margin attributable to VIP staff shareholders for the second quarter of 2021 was 3.7% as compared with 6.4% in the prior year period. Net income attributable to VIP shops shareholders per diluted ADS for the second quarter of 2021 decreased to 1.56 RMB from 2.24 RMB in the second quarter of the previous year. Non-GAAP net income attributable to VIP shops shareholders for the second quarter of 2021 increased by 11.3% year-over-year to 1.5 billion RMB from 1.3 billion RMB in the second quarter of 2020. Please note that non-GAAP net income attributable to VIP Shops shareholders includes a number of items, the details of which can be found in our earnings release. Non-GAAP net Non-GAAP net margin attributable to VIP shops' shareholders for the second quarter of 2021 was 5.0 percent as compared with 5.5 percent in the same period last year. Non-GAAP net income attributable to VIP shops' shareholders per diluted ADS for the second quarter of 2021 increased to 2.10 RMB from 1.92 in the second quarter of 2020. As of June 30, 2021, the company had cash and cash equivalents and restricted cash of 16.5 billion RMB and short-term investments of 3.6 billion RMB. Looking forward to the third quarter of 2021, we expect our total net revenue to be between 24.3 billion RMB and 25.5 billion RMB, representing a year-over-year growth rate of approximately 5% to 10%. Please note that this forecast reflects our current preliminary views of the market and operational conditions, which is subject to change. With that, I would like now to open the call to Q&A.
spk11: Certainly, ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, you can press the pound or hash key. Once again, it is star 1 to ask a question. Please note, there might be a slight pause as we compile the Q&A roster. We have the first question. This is coming from the line of Feitong Zhang from CICC. Please go ahead.
spk01: Hi, Shenzong, Feitong, and Jesse. This is Feitong from CICC. Thanks for taking my question. I have two questions. My first question is regarding to the competitive landscape. We observed some short video platforms are doing really well this year in their e-commerce business, and some brands are exploring the stocking at these channels. How should we think about the competitive landscape of the stock industry going forward? Any color would be very helpful. The second question is regarding to the third quarter guidance. How should we think about the third quarter guidance? Did we observe any impact from the pandemic in July and August since we factored in our third quarter guidance? Should we expect acceleration in the fourth quarter if the pandemic gets well contained? Let me briefly translate my question. Thank you for accepting my question. I have two questions. First, I would like to ask about the competition pattern of Shen Zong. We observed that many e-commerce platforms have done well this year, and some brands are also trying to store their products in e-commerce platforms. What do you think of the choice of the brand and consumers in the future to store their products in e-commerce platforms? The second question is about the management level. Thank you. The first question is about the short video, the live broadcast short video. We see that there are many platforms
spk07: foreign foreign In fact, in the end, goods and services have enough advantages. For example, prices have enough advantages, and brands have enough advantages. So this is Wangdao. So we are actually now, because we do very little live broadcasts ourselves, so we are actually only in our current operating model, we continue to strengthen our brand, strengthen our price, so that customers are more aware of the advantages of our Vipshop special sales. Then in addition, for this kind of short video, in fact, we see that it will absorb some of the eyes and traffic, but because the market of our users is still limited, including what kind of clothes to buy, what kind of clothes to buy, we will not spend too much time on that live broadcast. So we believe that there will be some impact, but the impact is not too big. So this is the first question. The second question is about Q2, that Q3 guidance, Q3 guidance, we actually on the one hand, a few factors, on the one hand, that is to say, we last year's Q3 is doing very well, because last year there was indeed a post-epidemic rebound. So this year, we have seen, for example, this year, because of the epidemic, there are some provinces and some cities, so it actually affects local consumption and everyone's shopping mood. So we actually consider this aspect of factors. Okay, let me translate the first answer to the first question.
spk10: In terms of live streaming models, there are a lot of platforms that are selling through live streaming, whether it's branded or it's low in season, low moving, slow moving old inventories. I think these platforms primarily are capturing a lot of customers But no matter what, the most important thing is merchandising, whether it's pricing advantages or brand advantages. That's the most important thing for customers. For VIP Shop, actually we do live streaming. What we focus most is to creating differentiated value for customers in terms of both branded merchandise and the pricing advantages. So despite the fact that short video platform has some impact in terms of attracting a lot of time and from customers, but it will have just some limited impact on our own business. In terms of the Q3 guidance, there are a few factors entering Q3. We've seen consumer sentiment is not as strong amid a weaker macro environment, which was partially related to some natural disaster in certain province and the resurgence of COVID-19 here and there. and the report that we had a tough phase in the same quarter of last year as we did see some strong recovery from the end of COVID-19. And also, Q3 is traditionally a live season and also live for the apparel industry. But turning to Q4, typically Q4 is the peak season where apparel ticket sizes tend to be larger and we will run promotion events as well as everyone else within the industry. So Q4 should hold up relatively well as long as the COVID-19 pandemic ends at that time.
spk01: Thanks, very helpful.
spk05: I would like to add on something what Eric just mentioned. Number one is that remember last Q3, we had a booming business post-COVID-19. So we had a larger base for this year. So that's why we had a softer guidance for Q3 this year. So that's number one. Number two is that we should notice that our active customer base actually grew year-over-year 32%. So that does provide a a foundation for us to grow our future business, and that's also a strong indicator that our business is healthy, and that should help with our future growth. Thanks.
spk11: Thank you. We have the next question. This is coming from the line of Eddie Wong from Morgan Stanley. Please go ahead.
spk06: Thank you, Mr. Shen, Ms. Cui, and Ms. Jessie for accepting my question. I will use Chinese first, and then translate it into English. Actually, I would like to ask Mr. Shen and Ms. Cui a question. I remember last time at the phone conference of the one-gigabit performance, it was in May. At that time, the guidance was about 20% to 25% UOV for two-gigabit revenue growth. At that time, Mr. Shen said that the guidance was quite confident. He felt that the guidance was still conservative. That is to say, maybe in the end, in June, is there any special situation that caused the whole sales in June to be slightly weaker than we expected, resulting in the final income growth of the whole year not exceeding the leading high end? In fact, I would like to ask Mr. Shen, have you seen that the situation in May is OK? Is there any special situation in June, including high base, including I see some relatively stressful places in terms of the target demand. Then a possible follow-up question is that we are looking at the whole NBS Sherlin data. In fact, the demand for online or offline apparel in July is relatively weak. If you look at the three-month period, has it had any impact on us? So in addition to what you mentioned before, the impact of the epidemic includes higher technical standards. Is the demand relatively weaker than expected? I have these two questions, and then I may translate them very simply. I have two questions. First is regarding the, you know, can give us the breakdown of by month, you know, in the second quarter, because we remember that in May, when during the first quarter earnings call, you mentioned that, you know, your guidance for the second quarter actually has been a little bit conservative. So we all expect, you know, you will have a quite strong growth. But in June, actually, you know, it seems like that the sales situation is relatively weaker than expected. So can you give us more color on that? And the second question is, can you also give us some color about how the apparel demand actually in July and so far in August? Because if you look at the MBS, the retail sales of apparel, which show some weakness for the apparel demand. So I'm not sure whether or not this also impact, you know, our guidance for the third quarter. Thank you.
spk07: Okay. China China China China I just want to say so, so, so, so, so, so, 所以总体是那个六月份是这个情况 那么我们其实在八月的 而就是说在Q3的这一个半月 我们也发现就是说 整体的服装消费是有些疲软啊 没有我们当年想象中的这么旺 但是呢就是说也不是 会太差 就是说但是呢就没有我们想象中这么好 所以说我们其实也在想 就是说可能是跟我们说的疫情反复有点关系啊 那么也有可能就是说整体的 This next trend will be a little less than it used to be, so we are actually looking at our future, for example, the future of this clothing business, but we see That brand has a lot of goods from all kinds of clothing brands, including the fact that the recent epidemic has repeatedly caused the goods of those brands In terms of the trend we have seen in June, as you mentioned, our guidance of 20% to 25%.
spk10: Actually, in June, we've already seen slower sales due to the longer promotional event for the whole e-commerce space. In the past, the e-commerce space tend to hold one or two three-day promotional events, but this has become a month-long promotional event, and it's becoming less and less attractive to customers. And back in June, we tried to deliver some coupons to customers to encourage their stand, but it did not turn very well. So we actually had some control over our marketing stand. And entering into the first one and a half months in the third quarter, we did see some weakness in the apparel category. It's not as strong as we had anticipated, but it's also not as bad as you probably have imagined. We think that primarily due to the resurgence of the COVID-19 here and there, and we are seeing the trend moving slower than before, but at the same time, we also see branded merchandise. Actually, they have very good inventory because you... the offline stores are not very, not a very good place to sell due to the COVID-19. So actually they have increased inventory online for us. So we have to see a few, a couple of months to see how the trend turns out.
spk03: Thank you.
spk11: Thank you. We have the next question from Ronald Kang from Goldman Sachs. Please go ahead.
spk02: Thank you. Thank you, Shendong, David, Jesse. So I have two questions, and I'll translate to Mandarin. The first question is also on our third quarter revenue guidance of 5% to 10%. I just want to know how that user growth and app who is kind of put within this forecast. Just want to see whether our user growth remains quite strong or maintaining the trends in the second quarter. And would that imply kind of APU would decline further on a year-on-year basis? And how do we see that into the fourth quarter as what we talk about as a peak season? And then my second would be on marketing spending that we spent around $30 37% more in marketing spend in the quarter. You mentioned about some control during June in couponing, but this is still quite an increase. And so are we expecting more spending as we head into the second half and how should we think of sales and marketing as a percentage of revenue, which is one of the metrics, which has been around 4.8% of revenues in the second quarter? Let me translate it. First, I'd like to hear about the three-week income growth rate of 5% to 10%. This is from the user and the app. Will our user growth be healthier? Will the three-weeks mainly be a decline in the app? How do we look at the four-week trend? Is the app worth pulling? The second is our... Sales and marketing has increased by about 37% in the second quarter, which accounts for 4.8% of the revenue. This is also faster than the revenue increase. As I said, we may not have invested too much in couponing in June. I would like to know how we should think about the revenue in the second half of the year. Thank you.
spk07: The first question is about ARPU.
spk00: Yes, about ARPU.
spk07: In ARPU, Q2 fell by 7 points. We can see that Q3 and Q4 in the future will still fall, but they won't be higher than this number. They will fall less anyway. Because there are several aspects. On the one hand, the recent fall is because we spent a lot of money
spk05: I take on the second question regarding the marketing expenses. So with respect to marketing expenses, this is probably the area that we have more discretion. And you know the marketing expenses, we split it between new user acquisition and existing user retention. So we have more discretion in terms of how we allocated the spending. As you can see, in the second quarter, we grow our active customer base by 32%. We would expect that we will continue to grow our customer base. And in terms of the strategy, we will be carefully evaluating how to execute in terms of the marketing strategies. And the objective for us is to maintain our marketing expenditure at a stable level and not to, in terms of the percentage of our revenue, we would expect that that number should remain stable. We would try to improve our, you know, efficiencies in terms of how we spend that dollar.
spk10: Okay, back to your question about trends. As you may have noticed, our output for the second quarter decreased by 7% year-over-year. But for Q3 and Q4, we don't expect similar deceleration. We think the decline will be much moderated. You know we have spent a lot of time in reactivating our old customers as well as attracting new customers. But recall in the second quarter of last year, we actually stop spending money on attracting new customers. So when entering into this year, we saw an increasing number of new customers and who may need some time to ramp up their spending, so which is still actually impacting the overall Apple. But we think that the general trend for Apple going ahead will be stabilized. We are confident because we've seen very strong growth in super VIP memberships who grew about 50% year-over-year in the second quarter. And we found that they have been very loyal and spending much more than an average customer. Actually, Super VIP members spend almost 10 times an average customer. So as long as we can grow our Super VIP members, we are confident that the app will improve over time.
spk02: Understood. Thank you, management.
spk11: Thank you. We have the next question. This is coming from the line of Thomas Chong from Jefferies. Please go ahead.
spk08: Good evening, management. I will ask questions on behalf of Thomas Chong. So I have two questions. The first question is about could management share some colors about the outlook for the 7 1⁄2 of the year and also 2022, including the revenues and gross profit margin and net profit margin. And my second question is, we mentioned about attractive young users. Do we have any updates about the initiation of user acquisition? 关于我们对下半年和 Okay.
spk07: China China China China China China The whole market space, including the number of users, will continue to increase. So we are actually quite optimistic about the future. But it is possible that the increase will not be as strong as this year's Q1 and Q2. But we ourselves think that in the future, we are a stable growth. For example, how much do we want to grow in the year? How much do we want to grow in the quarter? But we think that if there is no epidemic in the future, we are a very stable growth. In addition, it is also very important that we are confident in our productivity rate. In other words, it is also a very good productivity rate for long-term stability. So this is the outlook for our future. The second question is about the acquisition of new customers. We actually see that the acquisition of new customers is also good, especially the young people in the new customers. We recently saw that after 00, The growth we are talking about is the same as the increase of 6 or 7 points. In addition, we have increased the acquisition of new customers. For example, we have recently increased the investment on some short video platforms. We use these new, funny, and strange products to spread how interesting it is. We, Weiping, are a special sales brand. We want to let everyone know about these new users. So in terms of first question on the outlook of the second half and beyond, we think this council is actually
spk10: a resilient and long-term business. And many consumers have a mind share for discount sales. With our customer base continuing to expand, we are very optimistic that we are going to have a relatively stable growth outlook. And in terms of net margins, we've mentioned many times that we will continue to balance our top-line growth and profitability. And we've been very profitable for many quarters. And in the future, we will continue to maintain a solid level of profitability. And on our second question, new customer acquisition, we have various customer acquisition channels. And in the past, we have been leveraging a lot of traditional channels like digital advertising to acquire younger shoppers especially those who are born after 2000, we have been seeing a very decent ramp-up in the contribution of the shoppers who are born after 2000, up by 6% year-over-year in the second quarter. And in the future, we will try to build be more active in exploring more innovative customer acquisition channels, such as live streaming, short video, etc., to attract an increasing number of younger shoppers to our platform? 谢谢管理层的回答。
spk11: Thank you. Shall we move to the next question? The next question comes from the line of Nelson Chang from Citi. Please go ahead.
spk03: Hi Benjamin. Thanks for taking my questions. So I have two follow-up questions. The first question is regarding your guidance and your outlook. So looking beyond the third quarter revenue guidance and your expectation on fourth quarter, do you have any preliminary view on next year or medium-term normalization growth of the discount merchandising industry? And do you expect VIP shop to grow faster than the industry growth in future? So my second question is also regarding the new user profile. So wondering if management can provide more qualitative colors in terms of user mix from lower TCTs and their spending behavior from the new acquisition channel like a short video platform. In addition to your expectation of 3G and 4G, do you think the company's growth in this industry will maintain a stable trend? Will the management be confident that the company's growth will grow faster than the industry? Another question is, I would like to ask Mr. Guo to share more information about your new users, including landline cities, user accounts, and consumer behavior. Thank you. The first one is to ask about the expected growth.
spk07: Yes, about the growth of the industry. This kind of clothing, including our special sales, its processing speed and ability should be better than traditional large-scale clothing. So we actually have confidence in this. But let's say we want to compare it with the entire e-commerce industry. So because the entire e-commerce industry now, I guess the entire industry should be around 20%. So it's because there are all kinds of products in it. So it's difficult for us to make a comparison. But we are absolutely confident in the service industry. The second point is to ask about some features of new users. Low-end production. Yes, we actually see that our customers, or the current consumers, we are talking about low-end, uh, uh,
spk10: Okay, in terms of the industry outlook versus a VIP shop, you should be aware of that we are a fundamentally solid business. And if compared to traditional e-commerce platforms, we might be less, we might face greater competition, but if you look at the APRO-related segment, we are the number one in this council. We are very confident that our core competency in this council will outpace other peers in this particular segment. As you may know that the The general e-commerce industry still grows like 20% year-over-year, but for us, we are looking for relatively steady growth for the long-term future. In terms of user spend and user behavior across different tiers of cities, we have been seeing very stable trend in terms of GME contribution, user acquisition for our pool. There is not so much changing. in the behavior of different tiers of cities.
spk05: Let me add on something on this. So I think we want to differentiate ourselves with other e-commerce platforms in terms that we only focusing on apparel-related categories. And while the other e-commerce platforms may carry and many more other categories. So we are confident that we have maybe the leading leaders in terms of how we process apparel sales and inventories. So we should outperform in these categories as compared to our other e-commerce platforms.
spk03: Thank you very much.
spk11: Thank you. We have our next question. This is coming from the line of Natalie Wu from Haitong International. Please go ahead.
spk09: Hi, good evening management. Thanks for taking my question. And I'm asking the question on behalf of Natalie. My first question is concerned about new initiatives of the company. So can management share any colors to help us understand are there any new initiatives or businesses that we are now taking a trial in? And can we share about their recent developments? My second question is more concerned about our user engagement and user experience. Just now, I think management mentioned that there were some refinements in second quarter about improving the user experience on the platform. Just wondering what specifically were those refinements, and are there any operating metrics that could help us understand the improvement in user engagement? 谢谢管理层接受我的提问。 我是代表Natalie问两个小的问题。 The first one is about the progress of some of the company's new business or some of the considerations of the management layer. Is there any point of view that you can share with us? And then the second question is actually about us, which is also about users. As I mentioned just now, we have also made some improvements to improve the activity of users, including the experience of improving users. Can you help us share more about the specific measures, and especially if there are any data-based indicators that can help us better understand this? Thank you, Mr. Guan. The first thing is to ask if there are any new businesses, right?
spk07: In fact, we have recently focused on our main business, because we think that we are now working hard to make the brand special sales deeper, China China China China Then the second question is user experience. In terms of user experience, we believe that in fact, our brand special sale model, we are talking about good brands, good products, and good value. This is very important. And we have to do more and more features. In addition, in fact, these three good things just now, we need a good service. So in fact, in terms of user experience, we also put a lot of effort this year. Then, for example, in terms of our current user experience, because we are on that user, for example, our kind of carefree return, then in addition, for example, especially the size of clothes, the return rate will be relatively high. Then today, if he buys M, it is not suitable, then we are equal to go to the door to exchange goods, then give him a bigger one. For example, today, the customer has no worries about the return of the goods. For example, today, the customer only needs one point of our express delivery to pick up the goods. So we actually do a good job in the entire industry with similar services. In addition, we also greatly enhance the experience of these users at the front end of the shopping. Uh. I asked something on this. As mentioned earlier, as of the end of Q2,
spk05: our paid Super VIP drove by nearly 50%. So Super VIP members tend to spend a lot more than an average customer. So it's already contributed one third of our total GNV. So in Q2, we actually further increased our incentives to our Super VIP members, including an extra 5% off on selected merchandises. we provided a better targeted product to Super VIP members and improved our services. So in May, we also added a certain life of privileges for Super VIP members. And in the future, we will continue to provide more attractive membership privileges to improve their shopping experience. And hopefully, that will translate to more active customers into, you know, super VIP memberships.
spk10: Okay, back to your first and second question. The first question is the new business development. Actually, we have been very focused on our core business. We've made it clear that we are going to reinforce our execution, our merchandising strategy, and everything we do centers on that strategy. We're focused on discount sale and enhance our buyer capabilities. To the end, we are trying to optimize our brand portfolio and traffic acquisition with brands to enhance our competitiveness. And they are consolidating our long-term core competency in the discount retail market. So 99% of management focus is on discount retail and the execution of merchandising strategies. Of course, we are trying a lot of efforts in innovative areas. We've been investing to fulfill our innovation, but that's not our current priority. In terms of enhancing our user experience through some operational requirements, we You have to be aware that all the consumers are looking for good brands, good merchandise with good prices and good quality, and that should be matched with good services. So we've been investing heavily in bringing our user experience to the next level, including a hashless return or exchange leverage in our relationship with StreamFront Express Delivery. And on the other hand, we have been increasing our efforts, our front end and back end, in terms of customer service. We've seen that our core metrics evaluating customer service standards, like MPS, is improving very significantly. So in the future, we'll continue to invest in our efforts in bringing enhancing our customer service and enhancing our user experience.
spk09: Thank you, management.
spk11: Thank you. We have the next question from the line of Robin Leung from Daiwa. Please go ahead.
spk04: Hi. Thanks, management, for taking my question. This is Robin Leung asking on behalf of John Choi. I have two questions. Given the user growth is strong over the past four quarters, but ARPU is still showing a year-on-year decline, should we expect the ARPU to ramp up in 2022 when the new users normalize and the spending from the older users that we acquired this year to ramp up their spending? Would it be first half next year or the second half of next year? Should we expect to see less crippling by that time? And also the second question is on regulations. Are we seeing any positive or negative impact on our company? 谢谢管理层接受我的提问,我先翻译一下。 Our user growth is very strong in the past, but ARPU still has a decline. So, do we see ARPU ramping up in 2022? Of course, the new users may slowly slow down, and the spending of users we get this year can also ramp up. This may be in the first half of the next year or the second half of the next year. And will our couponing decrease? And the second question is, have we seen any positive or negative effects from the point of view of supervision? Thank you.
spk07: The first question is, will our ARP decrease? But because we said we pulled a lot of new customers, And the old class, for example, what is the concept of the old class we are talking about this year? That is to say, I bought it historically, but I haven't bought it recently. So that's it. So in theory, they will be lower after they come back, but they will come back after a while, including the new class. The first period will be a little worse, but it will come back immediately. So it will also improve with each season. So this is what we see now, because the number of users is very important. Then even if the ARP is a little bit lower now, we are not worried. In addition, we actually include the SVIP that we are now pushing hard. We actually want to correct this ARP in the future. That is to say, how to make customers buy more from us. Because the sales of the current SVIP has reached one-third of our entire business. So we actually want to invest heavily in the SVIP. Then let more people come to buy ARP will be improved. So this is our overall China China China China There are no preconditions, no forced actions. So theoretically, the development we are talking about is actually a good thing. I think we should also support this kind of supervision. In fact, let us have a more fair and healthy environment. Then everyone competes with their own abilities. So how to get users, and now it is also for this kind of big data killers,
spk10: Okay, on your first question on Apple Trends, we have mentioned Apple is on the decline in the second quarter, but it's going to be at a moderate pace in the quarters ahead because it takes time for new customers as well as our old customers, which means that Historically, we spend money on our platform, but recently haven't come to spend. So it takes time for these two types of customers to ramp up their spending. But quarter-over-quarter basis, we have seen very apparent pickup in their spending. So actually, we are not too worried about that. As long as we can grow our user base, Apple is going to improve over time. We've also mentioned that we are going to invest heavily in our SBIP super membership program. We want to improve their ARPU going ahead. So as their spending has contributed a third of our total net GMV, we are going to translate more customers into SBIP members, and that would help us to improve the ARPU over time. On your question on regulation, overall we believe the recent developments in terms of Internet regulations such as antitrust and unfair competition as well as data security especially the ban on forced exclusivity on merchants will benefit the IP shop to some extent. That means we will have a more open and transparent market with fairer competition. We will have more opportunity to partner with an increasing number of brands, which will further enrich our branded merchandise selections on our platform. So generally, we are very welcoming these regulatory developments because VIP Shop is going to benefit from them more or less.
spk11: Thank you. This is a time constraint. That concludes our Q&A session for today. I would now like to hand the conference back to Jessie for any ending remarks. Please take over.
spk10: Thank you for taking the time to join us today. If you have any questions or follow-up, please don't hesitate to contact me. We look forward to speaking with you next quarter.
spk11: Thank you. Ladies and gentlemen, that concludes our conference call for today. Thank you all for your participation. You may disconnect your lines now.
Disclaimer